An economy’s unemployment rate is a key indicator of its health and the ability of individuals to find work. High levels of unemployment can cause economic distress and are often a sign of an upcoming recession. When unemployment is high, people have less money to spend on goods and services, which causes businesses to contract and lay off workers. This cycle continues until the government intervenes in some way to create jobs.
The Bureau of Labor Statistics tracks the unemployment rate, which reflects how many people are not working and seeking employment. Unemployment rates are based on a monthly survey called the Current Population Survey, which interviews a random sample of households. The survey asks individuals about their job status and various personal characteristics. Various measures of unemployment exist, ranging from U-1, the most restrictive measure, to U-6, which includes discouraged workers and marginally attached laborers in addition to those actively searching for work.
Although there are a number of different ways to calculate the unemployment rate, most economists agree that it is best viewed as a percentage of the total population of workers. The survey excludes children and the institutionalized, but counts as employed anyone who did any work for pay or profit in the past week. Unemployment statistics can also hide demand for employment by counting as employed individuals who were looking for a job but failed to find one in the previous week, or who have been out of the labor force for so long that they are considered “discouraged” workers.